Income Tax Rules
The following has been gazetted:-
The above Rules has been gazetted on 5 July 2018 to effect the 2018 Budget proposal for expenditure incurred on the purchase of information and communication technology equipment and computer software packages to be eligible for an accelerated capital allowance. It allows for an accelerated capital allowance to be fully claimed in four years by a resident in Malaysia based on initial allowance of 20% and annual allowance of 20% with effect from Year of Assessment (“YA”) 2017.
(Click here for our earlier e-announcement for more information)
Malaysian Inland Revenue Board (“MIRB”)’s Public Rulings
The MIRB has issued the following Public Rulings:-
This Public Ruling explains the tax treatment in relation to qualifying building expenditure and the computation of industrial building allowances.
This Public Ruling explains:
This Public Ruling explains the computation of total income and chargeable income of a resident individual who derives income from business, employment and other sources.
This Public Ruling explains the computation of income tax and the tax payable by an individual who is resident in Malaysia.
The Public Rulings are available at http://www.hasil.gov.my [Legislation è Public Rulings].
The MIRB has issued the revised RPGT Guidelines dated 13 June 2018 (available in Malay language only) mainly to incorporate changes made to RPGT Act 1976 since the previous RPGT Guidelines dated 18 June 2013 was issued.
In addition, there are also changes made to the administrative procedures, which include the following:
In the event that the sale has been cancelled subsequent to submission of RPGT return form or payment of retention sum under Section 21B of the RPGT Act 1976, the disposer or acquirer is required to inform the MIRB by furnishing the following:
· Agreement for the sale cancellation; or
· Stamp duty refund letter with supporting documents; or
· Other official documents to substantiate the sale cancellation.
A copy of the ‘Surat Akuan Persetujuan’ duly certified by Commissioner for Oaths stating the disposer’s agreement to refund to the acquirer is required to be furnished to the MIRB.
The full text of the Guidelines is available at http://www.hasil.gov.my
Changes to the Malaysian Tax Incentives following Malaysia’s Commitment in Adhering to the Organisation for Economic Cooperation and Development (“OECD”) Taxation Initiatives
Malaysia in principal has committed to implement and adhere to the Base Erosion and Profit Shifting (“BEPS”) Action Plan. Under this commitment, Malaysia officially joined the OECD Inclusive Framework (IF) on BEPS as an Associate Member. The IF emphasises on the 4 minimum standards, namely:
(a) Action 5 – Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance;
(b) Action 6 – Preventing the Granting of Treaty Benefits in Inappropriate Circumstances;
(c) Action 13 – Guidance on Transfer Pricing Documentation and Country-by-Country Reporting; and
(d) Action 14 – Making Dispute Resolution Mechanisms More Effective.
Action 5 deals with identification of no or low preferential corporate tax rate (preferential regimes) that can be categorised as harmful tax practices. It focuses on improving transparency through the exchange of information on tax matters and requirement of substantial activities for any preferential regimes. Forum on Harmful Tax Practices (“FHTP”) has identified jurisdictions which provide preferential regimes for mobile geographical services activities related to intellectual property (IP) and non-intellectual property (Non-IP).
Click here to obtain information released by the Ministry of Finance on:
(a) Tax incentives identified for FHTP evaluation;
(b) Evaluation criteria; and
(c) Timelines for implementing Malaysian tax incentives to meet criteria set under FHTP.
The status of the incentives evaluation as of 9 May 2018 are as follows:
Updates to MSC Malaysia Regime
Malaysia has suspended its MSC Malaysia tax regime, pending changes to bring it into line with recommendations from the above initiative. MSC Malaysia status will be awarded only to entities that satisfy “nexus” and “substance” tests, which ensure the MSC Malaysia regime applies only to income arising from activities carried on in Malaysia.
In order to adhere to the timelines imposed by the international standards and to ease transition into the new regime:
However, for MSC Malaysia Status companies which have been granted approval on or after 17 October 2017 for non-IP income and would like to opt for grandfathering, the grandfathering period will end on 31 December 2018.
Malaysia Investment Development Authority (“MIDA”) Revised Guideline
The MIDA has revised the following guidelines:
1. Guidelines on Application for Incentive and/or Expatriate Posts for Green Technology
Below are the salient changes to the Guidelines:
(a) Distinction is made between new and existing company undertaking green technology project (no distinction in previous Guidelines);
(b) Inclusion of additional eligibility criteria for companies undertaking green technology services activities, which are as follows:
(i) Must provide integrated services; and
(ii) Employ at least 5 full time employees working in Malaysia.
(c) Company must incur adequate amount of operating expenditure annually in Malaysia to undertake the proposed green services / projects for business purposes where the operating expenditure should include local services for insurance, legal, banking, ICT and transportation, if those services could be sourced from local/domestic service providers. However, green technology projects for own consumption is exempted from this condition.
Items b(ii) and (c) are the changes to reflect the recommendations of Action 5 of OECD’s BEPS initiatives to impose the requirement of substantial activities on Non-IP incentives.
Companies that are granted approvals before 16 October 2017 can continue to enjoy the existing incentive without the imposition of the substantial activities requirement until 30 June 2021. For companies that are granted approval from 16 October 2017 without the substantial activities requirement, they can only enjoy the existing incentive until the earlier of the publishing of new guideline/legislation or 31 December 2018.
Sources within MIDA have verbally confirmed that a company is required to comply with the new substantial activities requirements and submit its application to MIDA if it wishes to continue enjoying the incentive beyond 30 June 2021 (for company granted approvals before 16 October 2017) or the date of publishing of new guideline/legislation or 31 December 2018, whichever is earlier (for company granted approvals from 16 October 2017).
The Guideline is effective from 1 July 2018 and supersedes the previous guidelines.
Companies given exemption must comply with all conditions stipulated in the approval letter, failure of which may result in the revocation of the tax incentive.
The revised guidelines is available at http://www.mida.gov.my/home/
Country-by-Country Reporting Registration User Manual
The MIRB has uploaded a guide on the Country-by-Country Reporting registration process for user’s reference.
The user manual is available at http://www.hasil.gov.my
KPMG Tax Services Sdn Bhd
Tai Lai Kok
|Long Yen Ping
– Head of Global Mobility Services
+ 603 7721 7018
Ng Sue Lynn
Soh Lian Seng